Invasion and Trauma, 1982-87

Lebanon, torn by its sectarian and political disputes, was further
cursed by invasion and a seemingly endless intermingling of internally
and externally inspired conflict from 1982 onward. Beirut suffered
grievously between June 6, 1982, when Israeli troops first crossed the
Lebanese border, and September 16, when they completed their seizure of
West Beirut. Normal economic activity was brought to a standstill.
Factories that had sprung up in the southern suburbs were damaged or
destroyed, highways were torn up, and houses were ruined or pitted by
artillery fire and rockets. Close to 40,000 homes--about one-fourth of
all Beirut's dwellings--were destroyed. Eighty-five percent of all
schools south of the city were damaged or destroyed. The protracted
closure of Beirut's port and airport drastically affected commerce and
industry. By 1984 the World Bank and the CDR agreed that Beirut would
require some US$12 billion to replace or renovate damaged facilities and
to restore services that had not been properly maintained since 1975.

In a December 31, 1982, national broadcast, President Amin Jumayyil
called for the world to launch a new "Marshall Plan" to help
reconstruct Lebanon. A series of conferences were held with major
potential aid donors. A number of reconstruction projects were launched
with support from the World Bank, the United States, and France. Roads
began to be repaired, ports were cleared of debris, and schools and
hospitals were built or rebuilt. But nothing was done on the grandiose
scale Jumayyil had originally envisaged.

It became clear that Saudi Arabia and the Persian Gulf countries were
not prepared to provide Lebanon with major reconstruction funds until
the World Bank and other Western financial institutions had taken the
lead in the reconstruction effort. And repeated breakdowns of fragile
truces meant that from 1984 to 1987 there were no real opportunities for
large-scale reconstruction efforts.

Still, financial and business circles were optimistic between
September 1982 and January 1984 because Western-backed reconstruction
plans seemed attainable under the presidency of Amin Jumayyil. But the
mood did not last. Economic progress was insufficient to override the
recurrence of sectarian strife, and the government seemed ineffective in
reconstruction and reconciliation. When Beirut was again divided in
February 1984, and the troops of the ill-fated MNF evacuated, a turning
point was reached. From that point on, it became impossible to ignore
the downward spiral of the Lebanese economy.

Foreign banks began selling and moving out. The decline of the
Lebanese pound intensified, and hyperinflation set in. Public debt
soared, and only drastic cutbacks in government purchases, which were
virtually restricted to oil, ensured an overall balance of payments
surplus in 1985. By 1986 the inflation rate was well over 100 percent.
Government revenues from taxation and customs duties continued to erode.
And one account declared that at the end of 1986 "currency
speculation and black marketeering have become the principal areas of
business activity." Economic control was falling into the hands of
those who possessed hard currency. The militias' tight grip on customs
revenues gave them increasing control over what was left of the national
economy; and their strength increased as the central government's
control over national finances weakened. Although the Central Bank was
still the guardian of one of the highest volumes of per capita foreign
assets in any developing country, the government's ability to use these
assets to reconstruct the country's shattered financial system or
national economy was doubtful.